Priceline Continues to Soar to New Heights

Priceline.com (PCLN) recently announced its Q4 2007 results, and soon afterwards, its stock price reached a new 52-week high of $129.24. The share is currently trading marginally above the $120 mark, having proved all critics wrong, and boasts a 52-week range of $51.61 - $129.24. This shouldn’t be happening in a recession, according to analysts!

I have covered Priceline earlier in my Web 3.0 series, as part of the online travel industry analysis, as well as the company specific analysis. The controversial Pricing Priceline piece last summer discussed the stock at length. Also read more on my analysis of Priceline compared with Expedia (EXPE) and Orbitz (OWW) from this past December.

Priceline’s Q4 revenues of $335 million were 29% higher than previous year Q4 revenue of $260 million and by 2% compared to market expectations of $329 million. For the year, it reported revenues of $1.4 billion on gross bookings of $4.8 billion, compared to the previous year's revenue of $1.1 billion.

For the quarter, its merchant revenue contributed 68% and agency revenue 32% compared to previous year contributions of 79% and 21% respectively. Year on year, the company's domestic revenue grew by 24% and international revenue by 113% for the quarter.

Its EPS of $0.96 for Q4 was substantially higher than market expectations of $0.84 and 66% higher than the previous year’s $0.58. Its annual earnings of $4.04 also surpassed market expectations of $3.98 and previous year earnings of $2.03, registering an almost 100% increase.

During Q4 it spent $60 million to buy back a part of the minority interest in its principal international subsidiary that contains the booking.com business, and $15 million of cash on acquisitions.

For Q1 2008, Priceline is looking at gross bookings to grow by approximately 60% to 65% over the previous year, with international gross bookings from booking.com and Agoda growing approximately 85% to 90% on a year-over-year basis and domestic gross bookings growing by approximately 35%. It is targeting EPS of approximately $0.50 to $0.60 against market expectations of $0.59.

For the year 2008, the company is forecasting gross bookings of between $7 billion and $7.3 billion with EPS between $4.80 and $5.10 against market expectations of $5.10.

Its revenue growth has been driven by international market expansion – both in the airlines and the hotel space. Thanks to the company's presence in over 60 countries, it is able to hedge potential recession facing the U.S. Bookings.com has helped them capture the market for European travelers coming into the U.S., lured by the cheap dollar against the robust euro.

Back in the U.S., it is experiencing robust market growth from their no-fee initiative on retail domestic fares as well as core merchant products.

According to analysts, the online travel industry should be looking glum, but Priceline certainly does not seem to be showing any such signs in its financials or share price. I maintain what I said earlier about Priceline, that the stock crossed its earlier 52-week high of $104 on account of its strong fundamentals, and not random speculation. The company seems to be delivering.

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